Entering a Foreign Market: Exports, FDI or Strategic Alliance?

  • Karl MoraschEmail author
Part of the Contributions to Management Science book series (MANAGEMENT SC.)


The decision over exports vs. foreign direct investment (FDI) is usually discussed in an extension of the so-called Melitz model where firms with heterogeneous costs compete in a monopolistically competitive industry. The present paper starts from a situation where a potential foreign entrant would be just indifferent between exports and FDI in such a setting. However, by assuming oligopolistic interaction, strategic considerations are also taken into account. It is shown how the strategic impact of lower marginal cost makes FDI more attractive in a Cournot setting while exports are preferable under price competition in a market with differentiated goods. Beyond that it is also explored how a strategic alliance with a local incumbent could be a superior alternative for market entry.


Alliances Entry strategies FDI Oligopoly Trade 


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© Springer Nature Switzerland AG 2019

Authors and Affiliations

  1. 1.Bundeswehr University MunichNeubibergGermany

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